Shuguang Wang v Valuer General

Section 6A land value

1. Relevant provisions of the VL Act provide: Part 1 Preliminary … 6A Land value (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. (2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that - (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made. … Division 6 Register of land values … Part 3 Notices and objections 29 Notice of valuations to owner (1) On furnishing a valuation list to the council of a local government area, the Valuer-General must cause notice of each valuation contained in the list to be given to - (a) the owner of the freehold estate in the land, and …. (2), (3) (Repealed) (3A) A person to whom the Valuer-General has given written notice under subsection (1) may lodge with the Valuer-General written objection to any such valuation. … 34 Grounds of objection (1) In relation to land the only grounds upon which objection may be taken under this Act are - (a) that the values assigned are too high or too low, (a1) that the area, dimensions or description of the land are not correctly stated, (b) that the interests held by various persons in the land have not been correctly apportioned, (c) that the apportionment of the valuations is not correct, (d) that lands which should be included in one valuation have been valued separately, (e) that lands which should be valued separately have been included in one valuation, and (f) that the person named in the notice is not the lessee or owner of the land. … Part 4 Appeals to Land and Environment Court Division 1 Appeals … 40 Powers of Land and Environment Court on appeal (1) On an appeal, the Land and Environment Court may do any one or more of the following - (a) confirm or revoke the decision to which the appeal relates, (b) make a decision in place of the decision to which the appeal relates, (c) remit the matter to the Valuer-General for determination in accordance with the Court's finding or decision. (2) On an appeal, the appellant has the onus of proving the appellant's case.

Mr Wang

1. Mr Wang tendered a court book (Ex A) and relied on the following documents: 1. A letter addressed to Mr Wang from the VG dated 28 October 2019 stating that his objection to the land valuation for 62 Farnsworth Avenue of $438,000 at 1 July 2018 could not be accepted because it was lodged out of time. 2. A "Property Details Report" issued by the VG dated 24 July 2020 stating that the land value for 62 Farnsworth Avenue at 1 July 2019 was $394,000 and at 1 July 2016 was $358,000 (Appendix H). 3. A "Report on objection to the land value under the VL Act" prepared by Mr Andor Kabok dated 25 August 2020 in relation to the value of 62 Farnsworth Avenue for the 2019 valuation year. Mr Kabok did not recommend a change to land value. 4. A letter addressed to Mr Wang from the VG dated 11 November 2020 stating that his objection to the land valuation for 62 Farnsworth Avenue of $394,000 at 1 July 2019 had been disallowed. 5. The Class 3 application dated 4 January 2021. 6. Mr Wang's letter to the VG dated 11 March 2021 contending that the land value of 62 Farnsworth Avenue should be lower than $394,000. 7. A table prepared by Mr Wang headed "Notice of Valuation and yearly increase of land valuation for 62 Farnsworth Avenue" for 2014-2020 (Appendix A). 8. A table prepared by Mr Wang headed "Yearly growth report provided by Australian" (Appendix B). Mr Wang stated orally this showed NSW metro property statistics for 2015-2020 based on a report of PRD Nationwide. The PRD report was not provided in the court book. 9. A table prepared by Mr Wang headed "Property sold price in Campbelltown for properties similar to 62 Farnsworth Avenue (4 Beds, 2 Baths, 1 Garage 720m2)" (Appendix C). The properties referred to are 8 Austin Avenue for 2014-2016, 28 Hoddle Avenue in 2017, 163 Waminda Avenue in 2018 and 7 Meehan Place in 2019. The sale price, size, number of bedrooms, bathrooms and garages for each property are identified. All properties are understood to be in the Campbelltown area. Mr Wang stated orally he had identified these properties by searching on the internet. 10. A table prepared by Mr Wang headed "Reference URLs for sold properties" (Appendix D). None of these reports were before the Court. 11. A table prepared by Mr Wang headed "Reference URL for yearly growth report provided by PRD Australian" (Appendix E). None of these reports were before the Court. Mr Wang stated orally these reports informed Appendix B. 12. A table prepared by Mr Wang headed "Notice of Valuation and yearly increase for the properties - Provided by both Valuer-General and myself" from 2014-2020 for 62 Farnsworth Avenue, 59 Farnsworth Avenue, 21 Farnsworth Avenue, 40 Austin Avenue, 7 Meehan Place, 163 Waminda Avenue, 28 Hoddle Avenue and 8 Austin Avenue (Appendix F). 13. A table prepared by Mr Wang headed "Total Land Value Increase from 2015 for above property" in 2017, 2018, 2019 and 2020 for the properties 62 Farnsworth Avenue, 59 Farnsworth Avenue, 21 Farnsworth Avenue, 40 Austin Avenue, 7 Meehan Place, 163 Waminda Avenue, 28 Hoddle Avenue and 8 Austin Avenue (Appendix G).
2. Mr Wang was also allowed to tender, despite their lateness, land value details from the VG's records for properties 7 Meehan Place, 163 Waminda Place, 28 Hoddle Avenue, 8 Austin Avenue, 59 Farnsworth Avenue, 62 Farnsworth Avenue, and 21 Farnsworth Avenue for 2014-2019 (Ex B). I note for completeness that 40 Austin Avenue was not relied on for this appeal and the records for it were not included in the exhibit. According to Mr Wang this is the data on which the tables in Appendices F and G are based. These documents were provided to the Respondent and the Court by email without notice or leave of the Court at about 9:00 pm the day before the first day of hearing.
3. I should note for completeness that a report of a valuer Mr John Van was included in the court book against the objection of the VG. Mr Van calculated a land value of $350,000 for Mr Wang's property for the 2019 valuation year. Mr Wang had informed the Court before the hearing that he did not intend to rely on expert evidence. Mr Van was not present at court as Mr Wang had not called him. I upheld the objection of the VG and did not allow Mr Van's report to be relied on given that rr 31.23 (expert witness code of conduct reference absent) and 35.2 (cross-examination of deponent requested) of the Uniform Civil Procedure Rules 2005 (NSW) were not complied with.

Valuer-General

1. The VG relied on the following documents in the court book (Ex A): 1. a statement of facts dated 25 March 2021; 2. the expert valuation report of Mr Kabok dated 21 May 2021; and 3. a map showing locations of the five comparable sales relied on by Mr Kabok being: Sale Address Distance from Subject (approx.) Sale 1 21 Farnsworth Ave, Campbelltown 50 metres Sale 2 35 Farnsworth Ave, Campbelltown 220 metres Sale 3 59 Farnsworth Ave, Campbelltown 270 metres Sale 4 1 Fisher Place, Campbelltown 220 metres Sale 5 1 St Johns Rd, Campbelltown 400 metres

1. Mr Kabok's valuer report derived a value for 62 Farnsworth Avenue for the 2019 valuation year as $410,000. Mr Kabok accumulated five comparable sales and analysed these to derive a land value for each site by deducting the value of improvements from the sale price and applying an adjustment for market movement between the date of sale to 1 July 2019. Mr Kabok included monthly data points to show that the median sale price for a dwelling in Campbelltown has decreased from December 2017 to 1 July 2019. Mr Kabok then applied the comparable sales to the subject site. A summary of the sales analysis follows: 1. Sale 1 (21 Farnsworth Avenue) sold for $570,000 on 14 April 2019. Mr Kabok analysed the land value as $420,000. A decrease of approximately of 5.5% for market movement was applied. The property was located in very close proximity to Mr Wang's property, had a larger parcel of land, similar zoning and planning controls, superior elevated position and similarly met the requirements for a dual occupancy development. Mr Kabok concluded that this was an overall superior site and supported a land value below $420,000 for Mr Wang. 2. Sale 2 (35 Farnsworth Avenue) sold for $500,000 on 4 March 2019. Mr Kabok analysed the land value as $351,000. A decrease of approximately 7.36% for market movement was applied. The property was located within very close proximity to Mr Wang's with a smaller parcel of land, similar zoning and planning controls, superior elevated position and shape but did not meet the requirements for a dual occupancy development. Mr Kabok concluded this was an overall inferior site and supported a land value well above $351,000 for Mr Wang. 3. Sale 3 (59 Farnsworth Avenue) sold for $550,000 on 21 January 2019. Mr Kabok analysed the land value as $350,000. A decrease of approximately 9% was applied for market movement. The property was located within very close proximity to Mr Wang's with a smaller parcel of land, similar zoning and planning controls, superior elevated position but did not meet the requirements for a dual occupancy development. Mr Kabok concluded this was an overall inferior site that supported a land value well above $350,000 for Mr Wang. 4. Sale 4 (1 Fisher Place) sold for $625,500 on 19 April 2018. Mr Kabok analysed the land value as $440,000. A decrease of approximately 13.4% was applied for market movement. The site was located very close to Mr Wang's property with a larger parcel of land, has similar zoning and planning controls, is a corner block and similarly meets the requirements for a dual occupancy development. Mr Kabok concluded that this was an overall superior site and supported a land value below $440,000 for Mr Wang. 5. Sale 5 (1 St Johns Road) sold for $546,000 on 18 October 2019. Mr Kabok analysed the land value as $415,200. No adjustment for market movement was made. The site was located close to Mr Wang's property with a slightly larger parcel of land, similar zoning and planning controls, a corner block, similar topography, similarly meets the requirements for a dual occupancy development, is an inferior busier street and position adjoining a padmount. Mr Kabok concluded that this was overall a relatively comparable site and supported a land value for Mr Wang within the vicinity of $415,200.
2. Mr Kabok was cross-examined about how he arrived at the amounts of reduction for improvements to the effect that their replacement would cost far more than the amount deducted. He stated that what was applied was not a replacement amount. He used the Rawlinson industry construction guidebook as a reference for costing adjusted for depreciation. It was put to Mr Kabok that if the property market decreased then land value would be expected to decrease. Mr Kabok stated that his land valuations were supported by comparable land sales, the usual approach to valuation in these circumstances.
3. A copy of an extract from realestate.com.au for 1 St Johns Road sent by Mr Wang along with his final written submissions on the morning of the second day of hearing was sought to be relied on by him. I identified it as MFI 1. The purpose of the document was to show that this property sold in 2001 for $565,000. The VG was permitted to rely on an extract of its records marked MFI 2 which showed that the sale was finalised in 2016 and was a non-market transaction. The 2019 sale of 1 St Johns Road referred to by Mr Kabok was a subsequent sale.

Mr Wang submissions

1. Mr Wang's objection is that the land value for the 2019 valuation year is too high. The land value of his land has increased substantially since 2014 yet the market value for the improved property has not increased by the same amount.
2. Previous years' land values are also too high for each property in Appendix F given the NSW metropolitan figures for yearly growth in the property market in Appendix B. The land value for his property has increased more than 36% for year 2016, more than 30% for year 2017 and more than 20% for year 2018 when compared to the previous year land valuation. For 2019, the land value for his property has dropped by only 10% although the market price has dropped by 23%. Further, the land value for all the properties in Appendix F have been increased by almost exactly the same percentage for the years 2017, 2018, 2019 and 2020. This suggests that the VG has applied the same percentage increase each year and not looked at comparable sales.
3. The previous years' land values are relevant. They are referred to in the VG's report. The 2019 revaluation process is based on the result of previous valuation processes in 2016, as can be seen from the Property Details Report issued by the VG (Appendix H).
4. Mr Wang submits he can consider previous land valuations of his property as part of this appeal. Consideration of the 2019 land value must have a starting point and he considers the 2014 land value year is appropriate to use for that purpose.
5. The market value of a property is reliable and shows the value of improvements.
6. While he is not an expert property valuer he is able to analyse the data he has presented to the Court.
7. Mr Wang criticised Mr Kabok's valuation approach. For the land value year 2019, Mr Kabok has adopted the comparable sales approach identifying five sales. The amounts deducted for improvements are quite inadequate given that the substantial property improvements of house and garage for each of these properties suggest the amount of deductions are too low and therefore the land values are too high.
8. Based on the fact that the property market price has increased around 26% in the last five years, Mr Wang calculates that the land value is $236,137. If the market decreased by 23% for 2018-2019 the land value would be $337,000. The land value increase rate might not be the same as the property market price increase so that the Applicant would accept $350,000 as the land value for the 2019 year.

Valuer-General submissions

1. The conventional approach to land valuation for the purposes of s 6A(1) is the direct comparison approach adjusting identified comparable sales for unimproved land value, as Mr Kabok has done. Numerous authorities confirm that that is the correct approach, most recently Peter Sleiman Property Investments Pty Ltd v Valuer-General of NSW (No 2) [2021] NSWLEC 47 at [191] per Robson J and the cases cited therein. The comparable sales method requires the accumulation, analysis, adjustment and application of comparable properties to a subject: Capuano v Roads and Maritime Services [2018] NSWLEC 59 at [13]-[18]. This is the approach Mr Kabok has applied.
2. Mr Wang's approach is novel and incorrect.
3. Firstly, Mr Wang assumes that the 2014 land value and land values in other years are correct in submitting that the 2019 land value has grown too much between that 2014 land value and now. Only the 2019 land value is in issue. The Court cannot inquire into the 2014 land valuation or for any other year in this appeal: Barratt v Valuer General [2015] NSWLEC 1141 at [34] (Barratt).
4. Secondly, Mr Wang's method is incorrect as he compares land values for the purposes of the VL Act with the market value of properties generally in the real estate market. Section 6A(1) does not consider the value of improvements on the land. Unadjusted property sales are not relevant for s 6A(1) purposes.
5. Mr Wang refers to movements in the property market in "NSW metro" in his Appendix B. No evidence about the figures in the table in Appendix B are before the Court. Whether NSW metro includes Campbelltown is unknown. In any event, the use of averages is unsound see Barratt at [30] citing McCathie v Federal Commissioner of Taxation (1944) 69 CLR 1. Gray v Valuer-General [2005] NSWLEC 513 at [15] also identified that there was no evidence that the property market moved in a uniform fashion. This submission is made on the assumption these movements in the property market over time are applicable in this context (they are not). Mr Wang's approach of comparing market value of property and land valuations under s 6A(1) is not comparing like with like. Comparison of market wide price movements to the issued land value in a different year to the valuing year has no role to play in the valuation process for the purposes of s 6A(1).
6. Thirdly, the mass valuation process by the VG which results in relatively uniform percentage increases across properties is irrelevant to this appeal process where the approach of the VG is the comparable sales approach for the individual property.
7. Fourthly, 1 St Johns Road does not provide the assistance to Mr Wang that he asserts given the sale finalisation date of 2016 for $565,000 by the public trustee - a non-market sale it appears.
8. Mr Wang only relies on one sale in Campbelltown which traded in 2014, 2015 and 2016 (8 Austin Street). This data does not provide a sound basis from which to extrapolate market movements in the area.
9. The Court should reject Mr Wang's novel approach.
10. Mr Kabok's approach should be accepted as he applied the correct approach, is a valuation expert familiar with the application of the comparable sales methodology and has explained how he derived his figures. The objectives of the comparable sales approach is to compare comparable sales. Those selected by Mr Kabok are close to the property, have similar improvements and allowance is made for superior or inferior aspects of the properties compared to the subject. He identifies that Sales 2 and 3 are smaller, do not have dual-occupancy potential and are inferior to the subject site. Sales 4 and 5 are considered to be superior for the reasons stated. As stated in cross-examination, the deductions for improvements are based on the depreciation value, not replacement value of improvements - an orthodox approach in valuation practice. The value of $410,000 is supported by the comparable sales exercise undertaken by Mr Kabok. None of Mr Wang's criticisms as a lay person are relevant or undermine Mr Kabok's conclusions.
11. Mr Wang listed a number of other properties in Appendix F not referred to by Mr Kabok. The Court has very little detail about these. Mr Wang asserted they were similar in terms of number of bedrooms and garage. More complex analysis is necessary of matters such as location, access, topography, land size, presence of eyesores, inter alia. A valuation should make as few adjustments of comparable sales as possible. Mr Wang has not undertaken the process necessary for a comparable sales approach, nor has he called an expert valuer to do that on his behalf. None of the sales relied on have been adjusted by an expert valuer to ascertain the land value of the property. They are not analysed, adjusted or applied to the subject property.
12. Mr Kabok's approach is orthodox in adopting the direct comparison method, making appropriate adjustments to derive a land value for the 2019 valuing year. If comparable sales are available they represent direct evidence of all the variables a valuer must account for: Graham Trilby Pty Limited v Valuer-General [2008] NSWLEC 217 at [27].
13. Mr Kabok concluded that Mr Wang's property has a land value of $410,000. The VG does not contend for that value. It asks that the land valuation under appeal be confirmed as that figure is sound.
14. Mr Wang has not discharged the onus of proof he bears to establish that the 2019 valuing year is too high.

Consideration

1. Mr Wang bears the onus of establishing that the 2019 land value he is objecting to is not correct and that another figure should be substituted pursuant to s 40(2) of the VL Act. This is an appeal against the land value of Mr Wang's property for the 2019 valuation year. That is the only year the Court can consider. Valuations for previous years fall outside the scope of the appeal. To the extent Mr Wang sought to complain that he could not lodge in this appeal objections to earlier land valuations given the time limit for doing so under the VL Act, that is the scheme under the VL Act.
2. To the extent Mr Wang takes issue with the benchmarking for mass valuations undertaken by the VG, that also falls outside the scope of this appeal. That a property valuation report issued by the VG referred to earlier land values for particular years does not mean these are part of the VG's analysis of land value.
3. For the reasons identified by the VG summarised above in [21]-[26] Mr Wang's approach is novel and is incorrect. I adopt these submissions and do not therefore apply Mr Wang's approach.
4. Considering Mr Wang's criticisms of Mr Kabok's approach concerning the amount deducted for improvements, Mr Kabok identified in cross-examination his approach to deductions being on the basis of depreciation. Mr Wang's criticism that the replacement value was appropriate was otherwise unsupported by any data or authority. His criticism in this regard was largely assertion.
5. I consider I should accept Mr Kabok's evidence that the land value is $410,000 as his report is well reasoned and justifies his conclusion. No variation to the issued value of $394,000 is sought by the VG. That amount will therefore be confirmed and the appeal dismissed.

Order

1. The Court orders: 1. Appeal No 21/2437 is dismissed. 2. The land value of 62 Farnsworth Avenue Campbelltown for the 2019 valuation year is confirmed as $394,000. 3. The exhibits are returned.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 July 2021